Chris Freind: Increasing mininum wage isn't the right solution

After his State of Union address, the president went to Costco to tout raising the minimum wage from $7.25 to $10.10 per hour. By highlighting Costco, one of the nation’s largest retailers, you would think many of its employees would benefit from the staggering 40 percent increase the president is proposing.

But none would.

In fact, the wage for entry-level Costco workers is $11.50 per hour (with average hourly wages of $20). Even using the “new math,” that’s higher than the best-case scenario wage the president seeks.

So the way to sell your plan of raising the minimum wage to 10 bucks an hour is to go someplace where they pay their lowest employees considerably more than that? Hello? Am I missing something?

Does the president not see the irony in pushing a federally mandated wage hike against the backdrop of a company that is, and has been, paying decent wages of its own accord, free from government intervention? Kind of begs the question, “If it ain’t broke, why fix it?”

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Here’s an idea. Maybe the president should be looking at Costco as an example of something that is working — a company making smart decisions to not just stay in business, but grow, and in the process keep its workers employed. You know, for all the unfair shots it takes, that thing called “the free market” still works pretty well. And it would be infinitely better if politicians would just leave it alone.

If they did, a funny thing would happen: The economy would grow. Significantly.

But don’t count on that anytime soon.

?

“It’s time to give America a raise!”

Yes, Mr. President, it sure is. On that, we agree, but if your plan were to pass, the only thing we’d be raising would be inflation, unemployment, and the number of Americans on the public dole.

And the reason is simple. Raising the minimum wage is not a solution to the nation’s economic woes. It is a tactic (and a bad one at that), rather than a strategy for getting America back on track.

1) There is no such thing as a business tax. Never has been, never will be. Any levy on companies always — always — gets passed on to the consumer. Translation: The very people minimum wage is supposed to help will pay more for everything. Minimum wage hikes, while well-intentioned, always result in negative unintended consequences.

2) Make no mistake, a minimum wage increase is a business tax. And companies will deal with it as they always have (though more drastically if Obama’s whopping increase were to become law): Some will had overseas; some will institute a hiring freeze; worse still, some will lay off employees to compensate for their increased wage costs; some will call it quits and go out of business altogether; and finally, those who remain will raise prices. Often, companies will do several of these things, further accelerating the economic decline.

3) Inflation goes up. Big time. When companies are forced to absorb increased costs, be they raw materials or minimum wage hikes, they raise prices. As prices rise faster than income levels, inflation shoots through the roof, so the 10 things in your grocery cart, which had cost $80, now runs you $100. Why? Because all of the supermarket’s suppliers are forced to charge more due to the government-mandated wage rate. And don’t forget that the government’s “official” inflation rate conveniently omits skyrocketing fuel and food prices — two big sectors that would see additional price spikes if wages are raised.

Additionally, labor unions love minimum wage increases because it gives them more negotiating power for the next contract. If a worker had been making $10.25/hour ($3 per hour more than the current minimum wage), and the president’s plan passed, the union would demand workers get that three dollars per hour above the new rate, since that was what the employee was worth prior to the wage hike. Hence, more inflation, and a lot more union dues.

The real-life result of inflation and wage increases is that the near-permanent underclass in America would be that much farther from realizing true economic opportunities, as fewer jobs will become available to them. And with that, welfare and other public-benefit programs would swell at a time we can least afford it.

4) If Washington really wants to end the “economic inequality,” it would realize that the only way is for America to once again become a manufacturing nation. No country can survive, let alone prosper, if it doesn’t make things. We can, but we choose not to, and that is the root cause of America’s decline.

This nation is blessed with the largest cumulative energy reserves on the planet, including the mammoth Marcellus Shale natural gas deposits, yet we drill for only a fraction of that Godsend. If we utilized those reserves in environmentally responsible ways, we would have the world’s cheapest energy — by far — and thus have a significant edge over our manufacturing competitors who immorally exploit their cheap labor (as energy is usually the most expensive manufacturing cost).

Our factories could once again be fired up, and American workers would earn a paycheck so far above the minimum wage so as to render that debate meaningless. And that’s not to mention the millions of lucrative jobs that would be created in the energy sector.

A manufacturing revival would increase tax revenue at all levels of government, helping to reduce debt without raising taxes. Employees would make enough to buy houses and cars, take trips, go out on the town, and buy consumer goods. Countless ancillary businesses would sprout up overnight, further contributing to the free market success story.

Government should not be in the business of setting wage rates and “creating jobs.” Its purpose should be to foster a climate conducive for businesses to start, grow, and thrive. If we create that environment (while obviously safeguarding workers’ rights), then America would awaken from its slumber and shed its “sleeping giant” image.

If not, we will become evermore comatose and eventually expire. So let’s forget the extraneous debate on artificially raising wages, and raise the only thing that truly matters — America’s kick-ass spirit.

Chris Freind is an independent columnist and commentator. His print column appears every Wednesday. He can be reached at CF@FFZMedia.com